Nikkei ends higher, exporters gain after yen pulls back

* Nikkei rises 0.7 pct, Topix up 0.8 pct
* Exporters rebound as yen reverses gains to trade lower vs
dollar
* Retail investors buy LDP-related shares - trader
* 7-Eleven parent up 1.8 pct after Q3 profit gains
By Ayai Tomisawa
TOKYO, Jan 9 (Reuters) - Japan's Nikkei average rose on
Wednesday, as a halt in the yen's gains prompted investors to
buy shares of exporters such as Toyota Motor Corp and
Honda Motor Co who would gain from a more competitive
currency.
The Nikkei has rallied nearly 22 percent over the past two
months, led by exporters as the yen weakened after new Prime
Minister Shinzo Abe called on the central bank to adopt an
aggressive monetary policy to energise the ailing economy,
including setting an inflation target of 2 percent.
Analysts said that investor risk appetite was intact amid
hopes for aggressive easing next week.
"We saw some profit-taking earlier as the yen was bouncing a
bit, but that's within the market's expectations as it has been
overheated," said Toshihiko Matsuno, a senior strategist at SMBC
Friend Securities.
The Nikkei gained 0.7 percent to 10,578.57,
breaching above its five-day moving average at 10,553.79, after
trading as low as 10,398.61 earlier in the session.
Wednesday's gain took the Nikkei's 14-day relative strength
index to 74.4, above the 70-mark which is considered overbought
and often signals a near-term pull back.
The Bank of Japan will consider easing monetary policy again
this month as it eyes doubling its inflation target, sources
told Reuters, as weakness in the economy threatens to delay the
country in getting out of deflation.
Any easing will likely take the form of another increase in
the BOJ's 101 trillion yen ($1.2 trillion) asset buying and
lending programme, mostly for purchases of government bonds and
treasury discount bills, sources familiar with its thinking say.
Exporters reversing early losses included Toyota Motor Corp
, Honda Motor Co, Nikon Corp and
Daikin Industries, up between 0.6 and 1.6 percent.
But Canon Inc and Panasonic Corp remained
weak, down 1.2 and 0.2 percent, respectively.
The yen was down 0.5 percent at 87.43 to the dollar on
Wednesday after rising 0.9 percent in the previous session, its
second day of gains.
RETAIL INVESTORS CHASE MARKET UP
Amid ongoing buying by foreign investors, traders noted that
retail investors also chased the market higher by buying
small-to-mid sized companies in sectors such as consumer
finances on hopes that the business-friendly LDP-led government
will review lending rules and loosen financial regulations.
Acom Co rose 0.8 percent, while Aiful Corp
added 0.4 percent.
Construction shares also attracted buying, with Kajima Corp
rising 1.8 percent and Taisei Corp climbing
2.1 percent on expectations that the new government will
increase spending on public works.
The rally in Japanese equities has pushed up their
valuations, with the 12-month forward price-to-earnings ratio
rising to 13, ahead of the U.S. S&P 500's 12.9 and the
pan-European STOXX Europe 600's 11.4, according to
Thomson Reuters Datastream.
Japan's broader Topix added 0.8 percent to 879.05 in
active trade, with 3.67 billion shares changing hands.
Other notable gainers included Seven & I Holdings Co
, which advanced 1.8 percent after its quarterly
operating profit rose 4.8 percent as higher profits from its
core 7-Eleven stores were supported by stronger income figures
at other retail formats.